Accounting for Non-Accountants: a manual for managers and students

Accounting and finance have a language of their own with a variety of statements and techniques that can mystify non-accounting colleagues. This new edition, like its predecessors, is written primarily for those non-financial students and managers who need to know about finance and accounting in any organization. The aim is to cut through as much of the jargon as possible and explain the various statements and techniques in a straightforward manner that requires no prior training. This seventh edition is being updated after a period of public debate as to the manner in which a firm’s financial affairs and dubious financing strategies are reported. A number of company failures, alleged wrongdoings among large companies, such as Enron, Hollinger and Northern Rock, have posed various questions about the reliability of published accounts. From the mid-1990s the Accounting Standards Board introduced Financial Reporting Standards (FRSs), which alongside Sarbanes-Oxley have made great inroads into this practice. It will take some time before all contentious areas are covered, but we now have 30 new standards relating to the profit and loss account, the balance sheet, the cash flow statement, and a number of specific items disclosed therein. There are three parts to this book. The first part deals with the types of statement found in the annual report and their interpretation. These include profit and loss account, balance sheet, cash flow, inflation adjustments and performance measures. Some chapters have been rewritten to provide a sharper focus on each financial statement and to reflect recent changes in accounting practice. Not only is the purpose of these statements explained, but also the principles underlying their preparation and their limitations. A new chapter has been included here on performance measures to embrace the topics of benchmarking and non-financial indicators. The second part of the book deals with the nitty-gritty of management accounting and introduces terminology and techniques likely to confront an operational manager. To play a team role in the planning and control of those resources for which they are held responsible, managers need to know about the costs of products and the running costs of their departments. We therefore need to look at how firms cost products and services before progressing to the planning and control techniques of standard costing and budgetary control. Many decisions are based on an ad hoc analysis of costs to determine the best course of action and marginal costing is an appropriate technique here. The final part of the book deals with the techniques of financial management, which concentrate on the efficient use of capital. This covers the cost of capital for the particular capital structure adopted by a business; the management of working capital; and the procedures for capital investment appraisal. Also included in this third part of the book are chapters on business taxation and overseas transactions. The efficiency with which a company carries out all these operations is reflected in its profit and loss account and ultimately in the value of that company’s shares. Financial management also has wider ramifications in a company’s ability to attract new capital and offer career development opportunities to its personnel. Most of the book is relevant to any form of business organization, large or small, in both the public and the private sector. Employees of public bodies will, however, find the chapters on financial ratios, share values and taxation largely irrelevant, although their organization may come into contact with the private sector or with its accounting techniques. I am very pleased that this book has been used for more than 20 years as an introductory text on finance and accountancy for non-financial students and managers. It is recommended reading on a variety of business and management courses, and technical degree courses, at a number of colleges and universities. I hope you enjoy this new seventh edition.